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ultimately been realized by PMSI.9 This factor favors
respondent.
viii. Taxpayer’s Financial Status
Substantial income from sources other than the activity
(particularly if the losses from the activity generate
substantial tax benefits) may indicate that the activity is not
engaged in for profit. This is especially true where there are
personal or recreational elements involved. Sec. 1.183-2(b)(9),
Income Tax Regs.
Petitioners argue that this factor weighs in their favor.
We disagree. Petitioners had substantial income and cash
receipts from activities other than PMSI, and their net worth
exceeded $1 million. Petitioners’ financial status allowed them
to finance the fishing activity and to use the activity’s losses
to reduce significantly their income tax liability. To be sure,
but for those losses, PMSI would have reported (and Ms. Peacock
would have been required to recognize) large amounts of ordinary
income in each subject year. By participating in the fishing
activity, however, petitioners aim to reduce their income while,
at the same time, participating jointly in an expensive activity
9 We find as a fact that the Billfish Series tournaments
awarded individual contestants prizes generally ranging from
$150,000 to $2 million. We are unable to find, however, the
amount of the specific prizes which were paid by the tournaments
in which petitioners participated. Nor are we able to find the
specific prizes payable by the tournaments in which the
misfortunes occurred.
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